Cost flow assumptions FIFO and LIFO using a periodic system Mower Blower Sales Co. started business on January 20, 2013. Products sold were snow blowers and lawn mowers. Each product sold for $700. Purchases during 2013 were as follows:
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The December 31, 2013, inventory included 10 blowers and 25 mowers. Assume the company uses a periodic inventory system.
Required:
a. What will be the difference between ending inventory valuation at December 31, 2013, under the FIFO and LIFO cost flow assumptions? (Hint: Compute ending inventory under each method, and then compare results.)
b. If the cost of mowers had increased to $480 each by December 1, and if management had purchased 30 mowers at that time, which cost flow assumption was probably being used by the firm? Explain your answer.